Ugly road for adviser diversity at Morgan Stanley: Lawsuit

A new lawsuit from a former senior diversity executive at Morgan Stanley paints a picture of a firm that has shockingly few African-American financial advisers and has made little effort to increase the number of black advisers at the firm.

The complaint arrives as the bank's CEO, James Gorman, has recently said that the company was making commitments to civil rights organizations and also promoting senior black women.

"Notably, since Gorman started as Morgan Stanley’s CEO in 2010 the firm’s diversity efforts have gone noticeably backwards," according to the complaint, which was filed on Tuesday in federal court in Brooklyn, by Marilyn Booker, who was the firm's global head of diversity from 1994 through 2010. "Morgan Stanley is estimated to have 16,000 [financial advisers.] Upon belief, there are only around 100 black FAs. That is, 0.63%, or less than 1% of all FAs are black."

The complaint also alleges that Morgan Stanley gave short shrift to diversity efforts, with no black senior management in charge of another group Booker led, the Urban Markets Group over the past decade, and poor commitment to the group, with white managers changing almost annually.

"Unfortunately, Morgan Stanley believed that the Urban Markets department, tasked with meaningfully impacting minority communities, needed to be supervised by white men," according to the complaint. "Perhaps this was so because there simply were no employees of color at such senior levels."

It's widely recognized on Wall Street that without the backing of a prominent team of senior leaders, new initiatives like diversity have little if no chance of getting off the ground.

When asked how many of Morgan Stanley financial advisers are African American, Latino, Asian or women, a spokesperson for the firm, Sue Siering, had no comment.

The complaint claims race and gender discrimination, retaliation and unequal pay.

Regarding the allegations in Booker's lawsuit, Siering said: “We strongly reject the allegations made in this claim and intend to vigorously defend ourselves in the appropriate forum.  We are steadfast in our commitment to improve the diversity of our employees and have made steady progress — while recognizing that we have further progress to make."

It was a battle to get Morgan Stanley to consider African-American applicants for financial adviser training programs, according to Booker's complaint.

"Booker herself has, throughout the years, referred several qualified black candidates for Morgan Stanley’s FA training program, but only one person has ever been hired, and that was a person that she hired into her own group," the complaint alleges.

"Whenever Booker would refer these qualified black candidates, she would receive some vague feedback about how these individuals did not meet some initial criteria or did not pass some initial test that was being administered," the complaint alleges. "It was incredibly disheartening to Booker that the high number of qualified minority candidates she was sponsoring could not even get through the initial hiring process."

Problems with hiring and building a diverse group of financial advisers, of course, are hardly new to Wall Street, which has been trying to shed its image of an old boys network for decades.

For example, a Bloomberg news article from 2007 cited a report by Wall Street's leading trade group, the Securities Industry and Financial Market Association, that underscored that lack of women and minority advisers.

The results of the survey included data from 31 firms that are members of SIFMA and employed about 330,000 people at the time. The survey showed that about 2% of the brokers and financial advisers at these firms were minorities and 16.3% were women.

Booker opened her 47-page complaint by describing Morgan Stanley’s response to George Floyd’s death, including a large contribution to the NAACP Legal Defense & Education Fund and the promotion of two black women to senior leadership committees, as Bloomberg news reported yesterday.

She noted that Chief Executive Gorman had described the present moment as a “turning point in race relations.”

But Booker cast the bank’s recent statements and actions as hypocritical in light of its alleged past conduct. “Clearly, black lives did not matter at Morgan Stanley,” her complaint alleges.